Earnings Season Bifurcation
As earnings season kicked into gear over the course of the second half of July, larger cap companies, which typically report earlier than their small cap peers, benefitted from company-specific drivers found in earnings reports. Small caps, on the other hand, remain subject to the whims of the macro winds as investors await earnings reports to come during the first two weeks of August. As these individual earnings reports are received, we expect quality small cap stories to find support in the marketplace, reversing July’s weakness.
Recapping the table above, for July, the S&P 500 was up 1.88%, the Russell 2000 was down 1.11% and the aggregate Singular List was down 6.25%. For the trailing twelve months, the S&P was up 6.45%, the Russell 2000 was up 4.6%, and the Singular Research List was down 7.5%.
Digging into the companies on our coverage list, as our table below shows, the top performing company on the Singular List was Cambrex (CBM). The company supplies products to the pharmaceutical and biotech industries and recently delivered an outstanding Q2 earnings report. This prompted our analyst to revise our price target upward by over 22% to $63 from $51. Looking at the rest of our Top 5 performers, a common theme was that positive performance was driven by quality earnings reports. As we noted at the outset, we expect company-specific earnings reports to be the ultimate driver of long term price appreciation.
Our worst performers in July saw their monthly returns driven by various factors or, in some cases, the absence of anything positive to push shares higher. In particular, our worst performer was Seabridge Gold(SA). Although the company has had positive news flow recently, the shares tend to move up and down following the price of gold. As gold fell during the month, so did SA. Other names, such as VDSI and CMT, have been great performers in recent months and in July gave back some of those gains as momentum stocks fell out of favor.
At Singular Research we continue to seek out investment ideas that have minimal to no Wall Street coverage. There are a number of uncovered and under-covered names we continue to track with an eye on helping our clients gain an edge. We thank our clients for your support of independent equity research.
Jeremy Hellman, CFA
Director of Research/Chief Operating Officer